We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to deal with the limited number of options quoted in the...

In this work we perform a pricing exercise of different types of spread options; we particularly focus on European calendar and crack spread options. We present the expressions followed by the joint characteristic functions of the underlying log-prices for a panel of bivariate processes. The...

This paper evaluates how different types of speculation affect the volatility of commodities' futures prices. We adopt four indexes of speculation: Working's T, the market share of non-commercial traders, the percentage of net long speculators over total open interest in future markets, which...

Recently, commodity index investing has come under attack. A Staff Report by the U.S. Senate Permanent Subcommittee on Investigation (hereafter, the "subcommittee report") "…finds that there is significant and persuasive evidence to conclude that these commodity index traders, in the...

This paper examines the behavior of futures prices and trader positions around the occurrence of price limits in commodity futures markets. We ask whether limit events are the result of shocks to fundamental volatility or the result of temporary volatility induced by the trading of...

This paper investigates price jumps in commodity markets. We find that jumps are rare and extreme events but occur less frequently than in stock markets. Nonetheless, jump correlations across commodities can be high depending on the commodity sectors. Energy, metal and grains commodities show...

We study momentum and mean-reversion strategies in commodity futures prices and their relationship to momentum and mean-reversion in commodity spot prices. We find that momentum performs well in futures markets, but not in spot markets, and that mean-reversion performs well in spot markets, but...

We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity price. Financial investors take positions in these contracts...

Winter storm Uri impacted large swaths of the Continental United States, including the State of Texas, over the period Feb. 13 -- Feb. 17, 2021. This research attempts to discern what the natgas and power commodity markets are anticipating for Texas for the First Quarter of 2022. As of this...

I construct a dynamic equilibrium model of storable commodities populated by producers, dealers, and households. When financial innovation allows households to trade in futures markets, they choose a long position that leads to lower equilibrium excess returns on futures, a more frequently...